Bangladesh is actively considering joining RCEP, a momentous decision made in an inter-ministerial meeting which now awaits Cabinet approval after positive feasibility study from Tariff Commission
In a strategic move towards economic prosperity, Bangladesh is contemplating joining the Regional Comprehensive Economic Partnership (RCEP), the world’s largest trading bloc led by China. The decision, set in motion after an inter-ministerial meeting on Tuesday, holds the promise of granting Bangladesh access to a vast market comprising 2.3 billion people and a staggering $26.3 trillion in economic potential.
The meeting, which was presided over by Senior Commerce Secretary Tapan Kanti Ghosh, will now require Cabinet approval. At the inter-ministerial meeting were representatives from the Prime Minister’s Office, the ministries of Textiles and Jute, Agriculture, Food, and Fisheries and Livestock, and the National Board of Revenue.
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“The inter-ministerial meeting, with some precautions, has made a decision in favor of Bangladesh joining the RCEP,” said Noor Md Mahbubul Haq, an additional secretary (FTA) of the commerce ministry.
“That means now we have to inquire whether Bangladesh will need to make an application or follow a prescribed model to join the RCEP,” he elaborated.
This bold move could usher in a new era of national growth and opportunity if accompanied by cautious deliberation and policy reforms.
Embracing the RCEP: A gateway to global trade for Bangladesh
The RCEP, an alliance of 15 nations that was established in January of last year, represents approximately 30 percent of the world’s population, making it an intimidating economic force. Designed to promote regional economic integration and cooperation, the accord presents Bangladesh with a unique opportunity to strengthen its position on the global market. The diverse membership of the trading bloc, which consists of Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Viet Nam, Australia, China, Japan, the Republic of Korea, and New Zealand, makes it an attractive option for nations seeking to expand their export markets.
Sri Lanka and Hong Kong have already submitted applications to become members of the bloc, as approved by the rules that have been in effect since 1 July of this year.
Several officials who participated in the meeting highlighted that in the 21st century, the global economy’s center lies within East Asian countries, including Asean members of the RCEP. Joining this China-led bloc aligns logically with Bangladesh’s interests.
Notably, the RCEP boasts not only allies like Japan, South Korea, and Australia but also allows India to join as a member at any time. Interestingly, six countries currently negotiating free trade agreements with Bangladesh are already part of the RCEP.
Economists and experts also view Bangladesh’s preparations to join the RCEP positively, considering it a timely step amid the country’s transition from a Least Developed Country (LDC).
Emphasizing the need for trade liberalization and tariff reduction, experts assert that standardization, harmonization, and quality control measures are vital to enhance the competitiveness of local industries.
Promising prospects as Tariff Commission’s feasibility study in favor
The RCEP beckons Bangladesh with the allure of boundless economic opportunities and transformative growth. As Tariff Commission delve into the prospects and feasibility of joining this colossal trading bloc, the study finds a roadmap towards propelling the nation into an era of unprecedented prosperity.
Expanded market access:
The RCEP comprises 15 countries, accounting for about 30% of the world’s population and a market worth $26.3 trillion. By becoming a member, Bangladesh gains unfettered access to this vast consumer base, opening up immense opportunities for its products and services in the region and beyond. The potential to tap into a market of 2.3 billion people is unparalleled and can significantly boost Bangladesh’s export capabilities.
Additionally, joining RCEP would raise GDP by a marginal 0.23 percent.
Export growth:
The Bangladesh Trade and Tariff Commission’s feasibility study on RCEP membership indicates a staggering 17.37% increase in Bangladesh’s exports, amounting to over $5 billion. The Ready-Made Garments (RMG) sector, a key pillar of the nation’s economy, stands to be the primary driver of this export growth. Exports of a few other sectors like textile, leather products, meat and livestock, beverages and tobacco would also have some positive impact from RCEP.
Additionally, the commerce ministry stated that 90% of trade tariffs must be reduced within the first decade of joining RCEP. There will be an additional 15 years to reduce the residual 10% of the tariff. This tariff reduction will increase market access and reduce costs for Bangladeshi exporters, allowing them to compete more effectively in RCEP nations.
Al Mamun Mridha, general secretary of the Bangladesh-China Chamber of Commerce and Industries, said, “If Bangladesh joins RCEP, Chinese investment in Bangladesh will also increase. In addition to the diversification of export products, the industrial sector of Bangladesh will get an opportunity to develop through technology transfer.”
Retaining duty benefits:
As Bangladesh prepares to transition from a Least Developed Country (LDC) to a developing nation in 2026, joining RCEP becomes crucial to retain duty benefits in major markets. The country currently enjoys duty-free export to RCEP countries like Australia, Japan, New Zealand, China, South Korea, and Thailand. Membership would ensure the continuation of these export facilities, preserving vital market access.
Manpower export opportunities:
The RCEP bloc represents a thriving hub of economic activity, driving the demand for skilled and unskilled workers. As a result, the apparel sector, which plays a pivotal role in Bangladesh’s economy, is projected to witness an increase in demand for skilled and unskilled labor by around 18%. This presents a significant opportunity for Bangladesh to leverage its abundant workforce and capitalize on the growing demand for its skilled manpower within the RCEP member countries.
Integration into global and regional value chains:
RCEP membership brings Bangladesh into the fold of one of the world’s most extensive trading blocs. This integration into global value chains provides access to new technologies, skills, and production processes, fostering innovation and enhancing the competitiveness of local industries. It allows Bangladesh to position itself as a significant player in the evolving global economy.
Joining RCEP allows Bangladesh to strengthen its position in the regional value chain. The bloc includes countries like Vietnam, Cambodia, and Laos, which are already members. By participating in this network, Bangladesh can leverage its strengths and forge strategic partnerships with other members, enhancing trade and investment flows.
Enhanced economic competitiveness:
While the feasibility study highlights the potential impact on certain domestic industries, RCEP membership is an opportunity for Bangladesh to elevate its economic competitiveness on the global stage. Policymakers must focus on policy reforms, innovation, and human capital development to harness the full potential of RCEP membership and mitigate any adverse effects on certain sectors.
Sustainable development and social responsibility:
RCEP membership comes with an implicit commitment to sustainable development and adherence to international labor standards. By embracing eco-friendly practices and responsible business conduct, Bangladesh can bolster its reputation as a responsible and ethical global player, attracting more socially conscious investors.
Potential challenges and reforms to to look into
While the benefits of joining RCEP are alluring, policymakers also need to look into the potential challenges that lie ahead many analysts remark.
Need of diversifying Bangladesh’s export basket:
Bangladesh’s export inventory must be diversified in order for the country to join the RCEP. Currently, the country relies significantly on the Ready-Made Garment (RMG) industry, which accounts for 64% of total exports to RCEP nations.
While the apparel industry is anticipated to gain significantly, other industries may suffer negative repercussions.
Therefore, policymakers must prioritize diversification in order to ensure the resilience and sustainability of the economy. By investigating new export opportunities in industries such as technology, electronics, pharmaceuticals, agro-products, and services, Bangladesh can reduce its reliance on a single industry and mitigate risks associated with shifting market dynamics. Adopting diversification will enable the nation to adapt to changing global trade patterns and nurture a stronger and more resilient economy.
Empowering SMEs:
Small and Medium-Sized Enterprises (SMEs) are the primary force behind innovation, employment, and economic activity in Bangladesh. As the nation pursues RCEP membership, the importance of empowering SMEs becomes crucial. Bangladesh must strike a balance between safeguarding domestic interests and capitalizing on the benefits of the trade bloc, in light of India’s decision to opt out of RCEP due to concerns over the competitiveness of domestic industries.
To enable small and medium-sized enterprises (SMEs) to thrive within the bloc, policymakers must provide targeted assistance, access to financing, and initiatives for capacity development. This approach will promote sustainable growth and ensure that the benefits of RCEP permeate all sectors of society.
Bilateral agreements and the path forward:
Bangladesh has bilateral agreements in place with a number of RCEP members, including Japan, China, and South Korea. To protect the country’s interests in this dynamic trading union, these negotiations must be approached with diligence and foresight. Importance needs to be placed on regional connectivity and foreign direct investment in order to create a robust economic ecosystem that encourages both export expansion and import substitution.
Lastly, the prospect of joining the RCEP presents a golden opportunity to harness the vast potential of the world’s largest trading bloc. As the nation takes its leap towards RCEP membership, prudent planning and strategic implementation will be the keys to unlocking the full benefits of this unprecedented economic alliance.
